Bankruptcy

[Steve]

--- In HPFGU-OTChatter at yahoogroups.com, "pulpficlet" <pulpficlet at y...>
wrote:
> I heard the other day that Mike Tyson (he is a boxer) earned $200 
> million over his career, but just declared bankruptcy.  He made less 
> than $100 in November of last year, and he claims he only has about 
> $5000 now.
> 
> I wonder how anyone can waste that much money, and I wonder if other 
> famous people have done that.  I can't think of any right now besides 
> the singer MC Hammer.
> 
> Paula

bboy_mn:

It's pretty well known that a substantial number of people who hit it
big in the lottery are bankrupt within five years. Why?

They make a big mistakes that people who make their wealth slowly
don't make. They forget things like; it's one thing to by a 5 million
dollar house, it's entirely something else to maintain the staff,
maintain the grounds, heat it, and pay the taxes.

I remember Donald Trump saying one of his biggest mistakes was buying
a $30,000,000 yacht. It had a crew of 68 and cost nearly $8 million a
year just to have it sit at the dock, and substantially more when it
was actually being used.

Also, when people hit it big, like rock stars and other celebrities, a
big entourage of people builds up around them. You have excess wealth
so you start hiring all your friends to work for you at various
meaningless jobs. What that usually means is you pay them each a 6
figure income to spend all their time traveling with you and partying
on your money. Oddly, but not surprisingly, when the money is gone,
the friends disappear.

So, the suddenly wealthy, very quickly build an extremely lavish,
extravagant, and expensive lifestyle with little or no thought to long
term finances and investing. When the 'wealth' bubble bursts, they
continue to spend money on the assumption that it is a bottomless
well. By the time they realize they have spent themselve into
bankruptcy, it's too late to salvage anything.

Two little exercises to put wealth in perspective. Sit down, and on
paper, try to spend $100 million. After you buy a few million dollar
houses and a few $100,000 cars, you discover you have barely made a
dent in that amount. The second part is to consider that at a 3%
annual interest rate, you are generating $3 million per year in
additional income. Three percent is about the equivalent of a CD
(certificate of deposit) at a bank. Invested wisely, you should be
able to get a return of 5% to 15% per year ( $5 million to $15
million/yr ).

The people who drive themselves into the ground are the people who
don't realize that the money train doesn't run forever.

Just a few thoughts.

bboy_mn